Bolivia, Sinosteel sign El Mutún contract

Bolivia's government signed a US$451mn contract to build the El Mutún iron and steel project in Santa Cruz department with China's Sinosteel Equipment, underscoring the growing presence of Chinese investment in the Andean region.

The 30-month contract will be 85% financed by Chinese loans and 15% by Bolivia, President Evo Morales said at the signing ceremony in Puerto Suárez. Bolivia will also call for bids for a supervision contract, Morales said.

"They'll install the project in two-and-a-half years, hand over the plant and manage our iron industry for a year," Morales said in broadcast comments. "At the end of the contract, they leave, and this plant will be run by Bolivians."

Bolivian personnel will be trained at Chinese steel plants and Beijing University, according to the mining ministry.

"The president ordered us to develop this sleeping giant, not just to extract, but also to develop the entire production chain here at El Mutún," mining minister Cesar Navarro said at the ceremony.

El Mutún, which holds an estimated 40Bt in reserves, could produce 150,000t/y rolled steel and 80,000t/y sponge iron, according to the mining ministry.

The project, which will include a pellet plant, a continuous casting machine and a rolling mill, has faced repeated delays and legal issues. The government closed down state iron mining company ESM last year for lack of funding after iron ore prices plunged.

Bolivia, which is battling arbitration with the previous Mutún operator, India's Jindal Steel & Power, over the cancellation of its contract, awarded the concession to Sinosteel in January.

Jindal, which pulled out of Bolivia in 2012 after acquiring rights in 2007 to develop the deposit, initiated arbitration in 2014 claiming US$100mn in damages arising out of the contract termination, including the execution of US$18mn in legal guarantees by Bolivia.

Bolivia, which has lined up Chinese state loans and awarded hundreds of millions of dollars in contracts to state companies such as China CAMC Engineering, is also seeking Chinese investment for lithium and rail projects.

Private investment has dwindled in Bolivia since President Morales, who was sworn in for a third consecutive term last year, has seized operations from miners including Jindal, Glencore and South American Silver since first taking office in 2006.